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) --

Ariad Pharmaceuticals'


admitted Wednesday that its leukemia drug Iclusig causes more blood clots and heart-related side effects than previously reported, forcing the company to halt enrollment in Iclusig clinical trials and advise patients currently on the drug to lower the dose.

Shares of Ariad plunged 67.2% to $5.62 in early Wednesday trading.

Going into Wednesday's announcement, Ariad's $4 billion market valuation hinged on the company's ability to grow Iclusig into a front-line therapy for chronic myeloid leukemia (CML). Some investors were

shorting Ariad on the belief that Iclusig was too toxic

to ever become a blockbuster cancer drug.

Wednesday, the shorts were proven right about Iclusig's safety risks. Ariad bulls who insisted

Iclusig's safety was not a problem

made the wrong call.

After examining two years of follow-up data from the clinical study used for Iclusig's approval, Ariad discovered the rate of serious arterial blood clots had risen to almost 12%. This compares to a blood clot rate of 8% after one year of follow up in Iclusig-treated patients.

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The higher incidence of arterial blood clots caused by Iclusig led to heart-related safety events in 6.2% of patients and strokes in 4% of patients, Ariad said.

After discussions with the FDA, Ariad has halted enrollment in all ongoing Iclusig clinical trials, including the so-called EPIC study which compares Iclusig to


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Gleevec in front-line CML patients. The EPIC study is the linchpin of Ariad's strategy to boost sales of Iclusig by moving into the larger pool of newly diagnosed CML patients.

Ariad had also instructed doctors treated CML patients currently with Iclusig to lower the prescribed dose.

The FDA will be issuing its own safety warning to doctors about Iclusig, Ariad said. Further changes to Iclusig's label are also likely.

-- Reported by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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